What Every Buyer Should Should Know About Buying New Construction Homes
Many people have turned to new construction homes to get exactly what they want when buying a home in 2018. The demand for new construction homes has dramatically increased in recent years becoming an easy alternative for home buyers who want a custom home without the stressful negotiation of a traditional home purchase. Unlike a traditional home sale, the seller is the actual builder, so there is no emotional connection with the home. Builders price their homes for their technical value rather than the emotional attachment most sellers have. And you can save a good bit of cash in the process. Also, there’s something undeniably satisfying about being the first person to live in a brand new home.
Types of New Construction Homes
- Pre-designed Homes: You can find any type of pre-designed home (i.e., a condo, townhouse, or traditional home). These homes are typically built as a part of a greater development, so all of the houses in the neighborhood will be similar. You will often have the option to customize the finishings in your home.
- Custom Homes: These homes are much more detail oriented. Everything in the house, from floor-plan to furnishings, is designed with you in mind. This could help you have your “dream home” but it will come with a price.
Fast Facts on Buying New Construction Homes
- New construction homes often come with a warranty. While this isn’t required, most builders offer a 1 year mechanical warranty and a 10 year structural warranty. The mechanical warranty is all-encompassing, covering things from a broken garage door remote to making sure appliances work. The structural warranty only covers the structural integrity of the house.
- The house may not be built yet. Builders will frequently sell a new construction home before it’s completed. As the buyer, you’ll be able to walk through a model home, to get the feel for what your house would look like.
- New construction homes are increasingly popular in urban areas. Builders aren’t always able to keep up with demand. For example, in Denver, you may need to wait a year to buy a new construction home.
- When thinking about mortgages, most builders will have a preferred lender. Many builders will want you to use their lender, while others will require you to at least be pre-approved by their lender. Almost all new construction builders will offer incentives to use their preferred lender, such as concessions at closing, free upgrades, or better appliances.
- The earnest money deposit is a usually higher percentage with new construction. In a previously-owned home, the deposit is around 1-2% of the sale, but in a new home the amount can be over 5%.
Top Tips for Buying a New Construction Home
- Like with all home-buying, location is key. Pinpoint an area where you would like to live and then look at new construction options in that area.
- If you hire a real estate agent to represent you with a new construction home purchase, you won’t end up paying any more for the home. The builder will pay your buyer’s agent a 2-3% commission. If you don’t have an agent, the builder will simply keep this as profit. So we recommend hiring an agent.
- There are other options as well that can be a win-win for you and the builder. TRELORA, could provide you with expert guidance and the builder would only pay $3,000-4,000 rather than the traditional 2-3% commission. This low cost for the builder could allow you to negotiate additional design center upgrades.
- Do research on your builder. Google them, read reviews, figure out how long they’ve been in business, ask to see previous homes they’ve built. Without a good builder, you can’t have a good house.
- If you’re living in an area like Denver that has regular, harsh hail storms, ask your builder about upgrading to high-impact shingles. You will be able to save on your home insurance with this upgrade.
- If your new home has a 1 year mechanical warranty, pay for a home inspection after 10 months of living in the home. The cost of the inspection will be more than worth it, if you find a defect in the home you didn’t realize when you moved in, and your warranty will still cover it.
Working with TRELORA
When you decide to buy a new construction home, everything is stacked in the builder’s favor contractually, meaning your earnest money becomes non-refundable immediately and the builder has all the flexibility when it comes to deadlines and the closing date. Buying a new construction home can be incredibly exciting. Be prepared and know what matters to you. If you’re looking for a new construction home, we can help you and get a bunch of great upgrades and a cash refund, just ask us how.